Bitcoin is a borderless digital currency that eliminates the need for a bank. Therefore, understanding this concept hinges on conceiving financial transactions without banks.

Former head of online payments giant Paypal is bullish on the future of digital money but maintains that bitcoin is a scam.

"Everyone is drinking the Kool-Aid," Bill Harris, former Paypal, CEO told CNBC's "Fast Money" Thursday. "I absolutely believe that money should be digital, is becoming more digital, and will be completely digital but it doesn't mean we need a new currency to record that."

Harris raised issue with the connection between bitcoin's value and usefulness. The digital currency cannot be an effective means of payment nor a great store of value because of volatility, he said.

The cryptocurrency rose more than 1,300 percent last year to nearly $20,000, then had almost half of its value wiped off in the first three months of 2018. Bitcoin was trading near $9,173 as of 6 p.m. ET Thursday, according to CoinDesk.

"There's no reason that a new currency should instantly have billions of dollars in value," Harris said.

Bitcoin, like gold, can only be mined up to a certain extent and supporters say this "scarcity" adds to its value. Only 21 million bitcoins will ever exist, according to the design of the cryptocurrency's anonymous founder known as "Satoshi Nakamoto." The 17 millionth bitcoin was "mined" Thursday, according to data from Blockchain.info.

"My autograph is scarce, I can promise that I will never autograph a piece of paper more than 21 million times but it doesn't make it valuable," he said.

Harris, who is also founder of Personal Capital Corporation, echoed his argument from an op-ed published in Recode this week. He called bitcoin a "colossal pump-and-dump scheme, the likes of which the world has never seen."

He did however advocate for blockchain, the technology than underpins digital currencies like bitcoin.

"There's the currency like bitcoin then there's the technology, blockchain technology has terrific applications, including financial transactions but we don't need a new currency to do it," Harris said.